(Updated 16:45 04/03/22)
The Pound US Dollar (GBP/USD) exchange rate plummeted today. The Russia-Ukraine conflict continued to drive investors to safe-haven currencies amid risk-averse trading. A better than forecast rise to US non farm payrolls figures also helped boost the US Dollar. This caused the currency pair to tumble.
US non farm payrolls rose to 678K in February above a forecast fall to 400K. The figures likely increased optimism in the US economy’s recovery and increased expectations for a interest rate hike from the Federal Reserve.
At time of writing the GBP/USD exchange rate is at around $1.3219, which is down roughly -1.0% from this morning’s opening figures.
Pound US Dollar (GBP/USD) Exchange Rate Drops as Risk Appetite Retreats
The Pound US Dollar (GBP/USD) exchange rate is dropping today amid a fresh retreat of global risk appetite. Reports indicating that Russian forces have attacked the Zaporizhzhia nuclear power plant saw investors flock to the safe-haven ‘Greenback’. It’s likely that the currency pair’s movements will continue to be dictated by developments in the Russia-Ukraine conflict.
At time of writing the GBP/USD exchange rate is at around $1.3296, which is roughly -0.4% down from this morning’s opening figures.
US Dollar (USD) Gains as Russia Strikes at Europe’s Largest Nuclear Plant
The US Dollar (USD) is climbing against its safer rivals today. Russian attacks on the Zaporizhzhia nuclear power plant have inspired a fresh wave of risk-off trading. This has in turn boosted the safe-haven ‘Greenback’. A ongoing rally in commodity prices has harmed USD’s chances against its riskier rivals however. Additionally, a pullback in US Treasury Bond Yields may have capped gains for the US Dollar.
Global risk appetite retreated on Friday morning after reports that Russian forces shelled Europe’s largest nuclear power plant. The attack caused a fire to break out at the plant. Ukrainian officials later confirmed that radiation levels had remained ‘within normal limits’. Ukrainian president Vlodymyr Zlenskiy said that the attack amounted to ‘nuclear terrorism’.
USD has likely also been bolstered today by a hawkish stance for the Federal Reserve. Testifying in front of congress on Wednesday, Fed Chair Jerome Powell signalled that the central bank planned to press ahead with a March interest rate hike. This came despite uncertainty in the markets generated by the Russia-Ukraine conflict.
Aditionally, Fed policymaker John Williams stated in a speech on Thursday that the Fed was ‘committed’ to taking action in order to curb soaring inflation.
Pound (GBP) Falls amid Cloudy BoE Outlook
The Pound (GBP) is continuing to drop against its rivals today amid a risk-off trading mood. Further escalation in the Ukraine-Russia conflict has weighed on Sterling today. A lack of significant data for GBP today has meant that the currency’s movements are likely to be dictated by geopolitical tensions.
Additionally, Sterling is likely to remain under pressure amid an uncertain outlook from the Bank of England (BoE) regarding future monetary policy. The central bank has sought to reign in expectations of an aggressive rate hike schedule amid uncertainty in the markets.
In a discussion hosted by the Economic Research Council, BoE policymaker Silvia Tenreyro stated that the conflict would likely hurt the UK’s economic growth. Tenreyro also stated that the conflict’s impact on inflation was still uncertain.
Significant losses for Sterling could be limited by reports that tensions over the Northern Ireland Protocol have eased in recent days. Boris Johnson is thought to be unlikely to trigger Article 16 before the upcoming Stormont elections.
GBP/USD Exchange Rate Forecast: Will US Labour Market Tighten Further?
With no significant data for the Pound for the rest of the week, the currency’s movements are likely to continue to be driven by global risk appetite.
For the US Dollar, investors will be keenly awaiting employment figures on Friday. February’s non farm payroll figures are forecast to fall. The unemployment rate meanwhile is set to remain largely unchanged. The expected robust payrolls reading could boost expectations of a rate hike from the Fed and help push USD higher.